Analysis of the Impact of Oil Price Volatility on the Markets of Developing Countries

Student: Belkin Artem

Educational Programme: Economics (Bachelor)

Year of Graduation: 2017

This study examines the relationship between oil price volatility and stock returns in the developing economies (Brazil, Poland, Mexico and Russia) using monthly data for the period 2003 to 2016. In order to measure oil volatility we consider GARCH (1, 1) model for Brent oil prices. We estimate a vector autoregressive model with the following variables: interest rates, economic activity, stock returns and oil price volatility. We find a multidirectional response of developing stock markets to an increase in oil price volatility. Results also indicate that oil price volatility is generally more significant for less developed economies (Brazil and Russia) than more developed economies (Poland and Mexico).

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